This research is concerned with the psychological development of young children from families in which one parent has a history of bipolar affective illness and children from families in which there is no diagnosed parental psychopathology. Children are studied longitudinally beginning at 12 months of age. Observations in the home, mothers' reports and a series of laboratory sessions provide assessments of children's affective and interpersonal functioning. Children from bipolar families were more likely to have behavior problems, disturbances in attachment patterns, deficits in social-cognitive functioning, and difficulties in interaction with peers. These children also showed considerable disregulation of emotion in stressful situations. Childrearing practices differed in normal and bipolar families.